market-driven management of start-ups: the case of
TRANSCRIPT
Market-driven management ofstart-ups: The case ofwearable technology
Milad Dehghani1
Ryerson University, Toronto, Canada
A. Mohammed AbubakarAntalya Bilim University, Antalya, Turkey, and
Mohsen PashnaUniversity of Tehran, Tehran, Iran
AbstractThe purpose of this paper is to identify and describe the drivers of lean approaches and successfulmanagementof wearable technology start-ups. The paper is a descriptive study that employed a case study methodologybased on semi-structured interviews with ten start-ups’ managers in Wearable Technology 2017 conference.Participants were selected based on convenience sampling and the pre-set criteria. The current studycontributes to this field through the main findings, which suggest that four stages need to be considered bystarts-up for a successful market readiness, including the time of entry and overcoming market entry barriers,product attributes, product development process, and commercialization. Finally, findings were categorized inthe form of an iterative learning loop model and also, practical strategies and methods were recommended forsuccessfully going through each stage.
Keywords Wearable technologies, Start-up, Commercialization, Lean, Market-driven management
Paper type Original Article
1. IntroductionStart-ups firms are the backbone of new technological products and services as well aseconomic growth. By introducing new products or services, start-ups can substantiallycontribute to a country’s competitiveness [33]. Wearable Technologies (WTs) refer toembedded portable computers and advanced electronics that integrate seamlessly intopeople’s daily lives in order to have them interact with a smart environment (i.e. homeappliances) anytime and anywhere [11]. Smartwatches, smart glasses, clothing, headbands,
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©Milad Dehghani, A. Mohammed Abubakar andMohsen Pashna. Published inApplied Computing andInformatics. Published by Emerald Publishing Limited. This article is published under the CreativeCommons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and createderivative works of this article (for both commercial and non-commercial purposes), subject to fullattribution to the original publication and authors. The full terms of this license may be seen at http://creativecommons.org/licences/by/4.0/legalcode
Publishers note: The publisher wishes to inform readers that the article “Market-drivenmanagementof start-ups: The case of wearable technology” was originally published by the previous publisher ofApplied Computing and Informatics and the pagination of this article has been subsequently changed.There has been no change to the content of the article. This change was necessary for the journal totransition from the previous publisher to the new one. The publisher sincerely apologises for anyinconvenience caused. To access and cite this article, please useDehghani,M.,MohammedAbubakar, A.,Pashna, M. (2020), “Market-driven management of start-ups: The case of wearable technology”, NewEngland Journal of Entrepreneurship. Vol. 18 No. 1/2, pp. 47-62. The original publication date for thispaper was 14/11/2018.
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/2210-8327.htm
Received 11 July 2018Revised 5 November 2018
Accepted 14 November 2018
Applied Computing andInformatics
Vol. 18 No. 1/2, 2022pp. 45-60
Emerald Publishing Limitede-ISSN: 2210-8327p-ISSN: 2210-8327
DOI 10.1016/j.aci.2018.11.002
wristbands, and jewelry (e.g., bracelets, rings, necklaces, and earrings) are examples of smartwearable products.
A report by the International Data Corporation [28] estimated that global wearablevendors would account for roughly 214 million shipments by 2020. According to wearabletechnologies database (Vandrico) in [54], 431 devices have been identified as WTs across arange of industries, including the medical, entertainment, fitness, industrial, gaming, andlifestyle sectors. More specifically, WTs will become ubiquitous shortly due to reduced cost,enhanced connectivity, increased reliability, improved usability, and long battery life [12].Accordingly, Dehghani and Dangelico [13] forecasted a demand increase on wearableproducts related to the entertainment and healthcare markets.
Despite the fast-paced growth of the WTs industry, it is still in its infancy stage; sometechnology and market-related barriers hinder market expansion and sales growth [46]. Inthis situation, the success of the WTs start-ups and market growth have fallen belowexpectations and are not in line with forecasts and cost, low perceived usefulness, the overlapbetween WTs and smartphones, appearance, comfort, and privacy are among the mainbarriers (Page, [40]. Shively [50] mentioned similar factors including health, comfort, look,privacy, and expense as parts of the challenges to launch and develop their new smartwearable products. Other challenges subsume overestimation of market size, poor design,and high product development costs [24].
According to Berglin [3], the number of applications forWTs that havemade a commercialimpact is disappointingly low. On the other hand, small enterprises that have proven to besuccessful tend to be restricted to smaller markets, such as novelty outerwear and luxurysportswear. As adoption of wearable devices rises among consumers, start-upswill facemorebarriers to enter the market and detect the right time of entry. Furthermore, despite theexistence of theories and models for product development process, start-ups seek lean,flexible and market-driven methods, which are in line with the fast-changing environment ofhigh-technology markets. Consequently, commercialization has always been entwined withuncertainty and key indicators (i.e., market size, technology forecasting, operation, time ofentry, competitor behavior and barriers to entry) which are continuously changing anddifficult to predict [1].
The absence or lack of marketing and business skills often results in the underestimationof essential business and marketing forces such as consumer preference, market demandsand commercialization. Given these problems, this paper contributes to the field throughhighlighting strategies of the successful WTs start-ups and explain their success factorsthrough a case study of ten successful start-ups in WTs market. In doing so, this researchinvestigates WTs market, entry barriers, and challenges of determining the right time ofentry. Additionally, this study discusses the strategic principles and methods used bysuccessful WTs start-ups to decide about the strategic selection of the product capabilitiesand product design, product development process, and commercialization. In sum, the papercategorizes the findings in reasonable stages in the form of a loop model, which has iterativecharacteristics and is nourished by internal and external feedbacks provided in all the stages.Continuous revolve of this iterative model may serve and also creates knowledge for learningenthusiast organizations and start-ups.
2. Data collection and sampleThis paper is a descriptive study and employed a case study methodology which is basedprimarily on semi-structured interviews according to Yin [58] since enabled us to understand(rather than merely measure) start-ups’ activities. Interviews were conducted with tenexecutives of start-ups who agreed to participate in this inquiry. Participants include CEO,co-founder, and industrial designer who attended the Wearable Technology (WT 2017)
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conference. Managers represent different international WTs start-ups across the globe(Table 1). The WTs companies were selected using convenience sampling method and onlythose early-stage start-ups that fulfilled the selection criteria of the present study (i.e., highperformance, high sales volumes and having a marketable product or at least completed thefirst prototyping stage) were chosen for an interview. It could insight researchers to obtainfirst-hand information from the start-ups that have recently faced all the difficulties of thiscomplex process from start to finish, giving the opportunity to highlight bottlenecks andenabling factors.
WT’s spans into several business sectors and industries, to avoid bias this was taken intoconsideration. The interviews were conducted face-to-face to get superior and quality data,and to reduce the risk of potential misunderstandings about the nature of the questions; andalso, to facilitate the fluidity of the discussions. This type of data collection allowsrespondents to elaborate on their opinions, views, and experiences, and to reduce thesubjectivity of interpretations to the minimum [21]. Drawing upon existing literature and inthe light of Peng’s [43,44] questions ‘what drives company strategy and what are the factorsof success or failure in business, we derive the research questions as follows:
1- What is your general perception of the wearable technologies market?
2- How big is the wearable technology market for your product? How fast is it growing?
3- Which are the main barriers to entering the current market and what is your opinionabout the time of entry?
4- What is your strategic approach towards selecting product capabilities and productdesign process?
5- What is your strategic approach toward product development process?
6- What are the challenges in commercialization of your product?
3. Case study analysisThis section describes the approaches and activities of 10 start-ups and their representativesfollowing the order of the defined research questions, which is complemented and enriched byrelated literature. The suggested strategies and methods mentioned in sections wereextracted directly from managers’ responses; while others were derived from stated clues inthe obtained responses which have been enriched using related literature. Due to the wordlimit, only a small number of the start-ups’ responses are presented.
3.1 General perception regarding the marketWearables in the high technology industry are deemed to be a profitable market shortly. Thetechnology of these new devices is certainly something that will be the key to the optimaloperating of a future society [51,15], especially in sectors such as healthcare and entertainmentthat are seen as a means to enhance competitiveness, as opined by some executives’ quotes:
“I may be a little biased because I’m trying to enter thismarket, but I believe the smart wearable is here tostay and can only grow. My point is, when the general public will be introduced to niche market forwearables instead of fitbits and apple watches, we will see exponential growth in different sectors(company C).”
“In the future, we will be developing new functions in healthcare sectors. For example, one that helpsremind you when to take your medicine. Our bracelet will also make smart analyses and will be able toinform your family if you wander off or are lost (company A).”
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Com
pany
Nam
eNumber
ofem
ployee
Establishment
date
Located
inProductdescription
Roleof
the
interviewee
Com
panyA
92016
Netherland
Awearabledeviceconnectingpeoplewithcareproviders,medicalspecialistsfor
Elderly
care
(falldetection,fallprevention
andapersonalalarm)
(CEO)
Com
panyB
42016
Italy
awearabledeviceforfashionablewom
en;itisacollection
oftechnological
braceletsbeautifullydesigned
andmadeinItalywithMuranoglass
andCarrara
marble,ableto
connectasm
artphoneor
smartw
atch
tothejewelthat
willactas
notifier
(CEO)
Com
panyC
32017
Denmark
Asm
artjewellery
devicethat
bringsfamiliestogether
inanew
,funand
innovativeway.Expectingparentsnow
havetheopportunitytosharethefeeling
ofthepregnancy,involvingthefathers-to-beinthisuniquewonderofcarryinga
child.T
hebaby’skicksaremonitored
andshared
throughan
elegant,sm
art
braceletim
itatingthemovem
ents,kickingsandhiccups
(Co-founder)
Com
panyD
42017
Netherland
Adevicethat
tracksandanalyzesinform
ationaboutthebrain
andbody
throughoutthesleepcyclewithan
advancedauto-learningsoftwarealgorithm
(Co-founder)
Com
panyE
32016
USA
Awearabledevicefor-profitsocialenterprise
engineeringaffordableand
sustainablehealthcare
solutionsto
combat
new
bornmortality
(CEO)
Com
panyF
62015
Belgium
Asm
artwristbandconnectedviaan
appto
oneor
severalsm
artphones.Inan
emergency,thewearersimply
presses
abutton
onthedevice,whichthen
automaticallyalertsalltheconnectedusersintheappon
theirphonealongwith
thelocation
ofthewearer.Connectionscanincludean
unlimited
number
offamilymem
bers,friends,neighbours
andspecialisedem
ergency
services
(Co-founder)
Com
panyG
32016
Germany
Itcombines
thefunctionalityofasm
artw
atch
andfitnesstrackerinordertofind
thebestway
aroundbringingconnectivityto
classicwatches
(Industrial
designer)
Com
panyH
82015
South
Korea
FashionableTracker
Accessory
(Co-Founder)
Com
panyI
52017
Australia
Asm
artbackpackdottedof
anarrayof
sensors
that
communicates
witha
smartphoneto
guideyou
safely
(CEO)
Com
panyJ
32016
CANADA
Asleevewearablethatallowswearstoascertainamorecompletepictureoftheir
overallhealth
(CEO)
Table 1.Characteristics of theanalysed start-ups, asof march 2017.
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“Wearables are a fast-growing market, and we are excited to see new players enter the field oflifestyle and healthcare (company E).”
According to executives’ opinions, it can be concluded that many start-ups are exploring thepotential applications for new wearable devices. Furthermore, the market will see newplayers in the niche markets, due to expenditure growth in the healthcare sector and a widerange of products for each demographic segment will be introduced for different occasions.Further, according to interviews of the case study, four unique use cases for WTs wererevealed, including health and fitness, lifestyle, productivity and organization, andenterprise.
3.2 The time of entry and overcoming barriers for entering the marketThe prior literature emphasizes the right time to enter amarket as an essential success factor,with great interest on the demand side of the market and less on competition betweendifferent players of technology-driven markets [5,18]. Entering the market in an earlier timemay provide the first mover advantage and path dependence if the technology has a clearadvantage to consumers [2]. Indeed, competitors can be followers that copy a product or thosestart-ups that have discovered opportunities independent of one another. Amanager of start-up described his opinion in this regard as follows:
“My product is still in a small niche “travel, lifestyle.”However, I am trying tomake it overlap with otherwearable categories like “sports and personal safety. So, acting as a first company in order to bedominant in themarket for each demographic requirement, our company can benefit from its profit. . .(company D).”
On the contrary, there is a possibility that the product launch receives a warm welcome if astart-up enters the market early and the advantages of the product are not clear toconsumers [49].
“I agree that smartwatches are still immature, and it is somewhat risky to enter this market, asbenefits of the products are widely missing. However, this is changing rapidly due to incredibleadvances in sensor technology, app development, going into smartwatch-related R&D. So,penetrating a specific segment of the market will bring us a valuable advantage (company G).”
Start-ups are always under the pressure of right time to enter to market and need to moverapidly, and in return, technical and product quality may be treated with a low prioritybecause of excessive increase in the speed of entering theWTs market [26]. However, being afirst mover is a significant source of competitive advantage for start-ups due to low buyerswitching costs and technological leadership [32]. Therefore, to take advantage of beingeither first mover in a niche market or a technical and quality leader, marketing relatedactivities like market research and manufacturing related activities like R&D should beperformed and paid attention simultaneously and in an aligned manner.
It is essential for start-ups to possess the skills, capabilities and know-how required atdifferent stages of business development. Accordingly, Qureshi [45] identified the importanceof balanced and complementary skills and also made emphasis on developing both technicaland business skills in start-ups. Generally, a notable weakness among start-ups is thedisability to develop successful marketing strategies as a barrier to enter a market [29].
“Many of the traditional care providers ’think’ problems – not being aware of what modern [cloud]alternatives offer. This is because of the lack of marketing strategies (company B).”
Also, Cooper and Sommer [8] highlighted the importance of digital marketing capabilities inthe successful introduction of technology; this is often seen as a key to start-up successes(see also [4,22,47].
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On the on hand, Dodet [16] mentioned that high growth markets with low entry barrierslike wearable technologies are more subject to deal with competitive overcrowding.Nevertheless, the acceptance of WTs products has faced a formidable obstacle due to thecurrent users, especially early majorities who do not consider poor product performance asthe decisive factor in purchase decisions, as is proved by low retention of the gainedcustomers. In this situation, more significant investments in marketing activities likeadvertising and brand building activitieswere mentioned by managers as ways to bypass thisobstacle. Utilizing all of the models, approaches, and methods discussed in the differentsection of the present article can break down barriers of entering the start-ups market, inparticular, WTs products. Dodet [16] study on WTs at the entry stage, identified three mainchallenges for early stage WTs. These challenges have been discussed as follows:
� Overcome lack of value-added services: Adoptingwearables just for the sake ofit does not provide enough motivation to purchase and is not persuasive enough.Therefore, beyond intrinsic motivation, extrinsic drivers like functional motivationsuch as linking people to each other in a different situation, context-specific featuresembedded in products and social engagement features can overcome lack of value-added services.
� Interoperability: Producing interoperable products and services lead to controllingand deriving benefits from high fragmentation of the market and expanding a vastrange of use cases for WTs products and increasing users’ utility.
� Business processes re-orientation: Rigid hierarchical structures leading toassumption-basedmodels can overcome by taking into account user-generated data indecisions. Involvement of potential and present users and stakeholders in generatingideas which use for producing features and design comes in handy. Applicablemethods to perform this market-driven approach will be suggested in the productdesign process and product development process sections.
During the interview, some managers mentioned to taking advantage of strategic businessmodels to overcome market entry barriers and obtain a competitive position in the market,includingThe BusinessModel Generation Canvas [39] andThe Lean Canvas [34] Maurya [34].The study changed the sequence of Osterwalder’ building blocks of the business modelgeneration canvas and replaced four blocks with new ones and transformed it into “LeanCanvas.” Accordingly, lean canvas emphasizes more on Problem, Solution, Key Metrics, andUnfair Advantage blocks which were replaced with Key Partnerships, Key Activities, KeyResources, and Customer Relationships blocks respectively.
Besides, the sequence of the Osterwalder’ building blocks of the business modelgeneration canvas changed like this: Problem, Unique Value Proposition, Solution, Channels,Cost Structure and Revenue Streams, Key Metrics, and Unfair Advantage. Mostly, startupsinvest in producing the wrong product or MVP, so recognizing the Problem is of greatimportance when designing a technology-based product. When the problem is characterized,the Solution—in the form of theMVP—can be determined. TheKeyMetrics block helps start-ups come to the realization that which are their main drivers of progress and advancement tomeasure how business is running at the moment, before receiving the sales report.
3.3 Selecting product attributes; capabilities and designThe term “customization” refers that the customer has to be involved in the product designprocess at some points [30]. Because consumers considerably vary in shape, dimension, andsize, to engage them, devices should enable customization through considering varies aspectsaccording to its uniqueness and the degree to which a customer is involved [36].
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“A greater level of variation in design is key for smart wearables to be successful. For an industry thatemphasis so much value on originality, that’s a huge problem. If everybody wears a same watch, we’ll alllook the same eventually. . . moreover, being the ”same“ is equivalent to fashion death (company I).”
The “fashionability” refers to how smart the technology device is, integrating it into a currentlandscape andmaking the devicemore ubiquitous. Fashionability can affect the perception ofdesirability and the comfort of a device [36].
“Our consumers should like the design, and the design of the wearables must complement their style orprovide something new to their wardrobe. Therefore, our first aim was to make something differentaesthetically and give them different stylistic choices in how they wear tech for different occasions intheir lives (company H).”
In smart WTs market, many consumers will have their first internet access capability via amobile device [57]. Therefore, “connectivity” with the expanding array of applications andsmart devices has become essential. One of the executives’ quotes expresses this concern:
“Connectivity is one of the important factors As the notion of wearables has determined to connect youdirectly with smart devices that you use on a daily basis (no mobile phone required and automatic datatransfer to application or service is done (company B).”
Another indispensable frequently mentioned issue by the interviewees was related to“Ergonomic Design” which has received attention from some start-ups such as HorusTechnologies, a manufacturer of smart glass for visually impaired individuals [16].
As Zhang andDuan [59] pointed out, amongst factors which profoundly affect the successof the innovation-based firms, a tendency toward market and customer orientation make aprofound impact on start-ups’ triumph. Manager of a start-up described his opinion in thisregard as follows:
“Only products and capabilities which fulfil customers’ expectation should be developed. Therefore, onlyproducts and capabilities should design which are considered as valuable ones by the majority of thepotential market. In this regard, market research is a useful tool which can assure taking into accountthe essential capabilities of the markets (company A).”
In this regard, Davis [10] model was designed to assess newly developingmarkets. Themodelsuggests that users’ purchase behaviours in newmarkets are influenced by key factorswhichare crucial determinants of user acceptance and should be taken into account in designingwearable products not only regarding appearance but all the features and capabilities,namely Perceived Usefulness, Perceived Ease of Use. Chesbrough [6] identified two otherimportant factors in this regard through investigating WTs start-ups, including Perceivedrisk, and Social and aesthetic factors.
3.4 Product development processProduct development process is categorized into four stages, namely Concept, Prototype,Mass production and Shipping [56]. Prototyping points out a quick and economical way thatserves to achieve understanding and evaluation of what final products should be [55]. In otherwords, the working version of a physical product successfully shows the key features andfunctionality of the final version of the product. From start-ups’ perspectives, starting with aproduct version that collects the maximum amount of validated learning regardingcustomers with the least effort is the key. It may provide start-ups with the flexibility to reactto new information and resolve uncertainties by a rapid prototyping process. Also, someinterviewees pointed out that new advancements in rapid prototyping processes (e.g. 3Dprinting or additive manufacturing) could change the process to more creative design.Moreover, the introduction of product ideas using a so-calledMVP (minimum viable product)without actual product implementation is the key.
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“The rapid prototyping process at this moment in time cannot meet the quality requirements for partsthat we produce in terms of features’ sizes, positional tolerances, and material surface. We are excitedto see where advancements in 3D printing are going because we believe it will be a significantenhancement to the creative design process (company G)”
According to some interviewee’s opinion, to utilize non-traditional approaches and in linewith the unique characteristics of innovation-oriented markets, especially wearables,utilizing innovative market-driven frameworks in product development process can lead tosustainable competitive advantages. The innovation and start-up literature suggest that thisapproach can be adopted utilizing two methods: “The Lean Start-up Methodology” [48] and“The Customer Development process” [4].
Business world witnesses failure of almost 90% of the start-ups established every year[42,19]. Generally speaking, there are many reasons for start-ups failures spans from wrongproducts, draining investments, scheduling problem, scaling up quickly, to hiring wrongpeople [9, 37]. Furr and Dyer [23] discussed the lean start-up methodology aims at rectifyingsome of these failures and flaws, which has become the entry barriers of technology-intensivemarkets dominated by established firms. In comparison to traditional approaches, the leanstart-up approach, which was presented by Reis [48], is a synthesis of the foundations foragile methodologies and lean procedures. Furthermore, a customer-oriented method, whichlays increased emphasis on the manufacturing of an efficient type of prototype-minimumviable product (MVP)-instead of utilizing time, money, and effort consuming frameworks andstrong and inelastic methods [9].
One of the primary tools which provide a practical and straightforward learning loop forimplementing the lean start-up methodology is the build-measure-learn feedback loop, whichintroduced by Reis [48]. It relies on the notion that start-ups can considerably decrease thelikelihood of failure and time, effort, and cost of the development process using iterativeexperimentations and share, test, and validate prototypes and ideas by the involvement of theearly adopters who can anticipate the start-up landscape since the product ideation stage.The customer development process which is flexible was introduced by Blank [4], thisprocess help to eliminate drawbacks of the old product development model. Analogous to thenew product development process [60]; the customer development process is a four-stageiterative process which is capable to simultaneously assess product development andcustomers’ feedback comprising customer discovery, customer validation, customer creation,and learning and company building.
3.5 Challenges in the commercialization processPrior studies highlighted the importance of commercialization as a benchmark for newproducts in the early stages (manufacture related stages), because of its critically to accelerateinnovation strategy [56]. Accordingly, commercial expertise for technically based scientists is acompetitive advantage in the commercialization process of high-tech products. This issue isdescribed by an executive’s quote as follows:
“My product is changing right now. The challenge is that I have reached the limitation of my developerskills and I need to meet a senior developer who knows commercialization and business. The firstconcept design was going to fail for sure. I was trying to unite a backpack to an IOT (the Internet ofThings) device but is prone to failure (company H).”
A fierce competitive market that is characterized by a high growth rate and marketfragmentation makes coopetition inevitable. Coopetitive strategy is composed of bothcompetitive and cooperative strategies and is a driver of market expansion. According toDodet (2016, pg.5), “competitive business environments are characterized by actorscollaborating on aspects such knowledge creation and the exploration of new productswhile competing at the same time for market share acquisition.”
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There is a time that companies collaborate with their competitors and complementors(producers of complementary goods or services). Therefore, start-ups are encouraged toengage in collective production of complements through an open technology strategy andutilize sponsorship if it needs production capability or expertise to manufacture a sufficientrange of complementary goods in a particular time [49]. Furthermore, first movers in markethave more time to develop (or push others to develop) complementary goods that boost theperceived value and attractiveness of their products and also, the availability ofcomplementary goods could create a competitive advantage over later offerings. The issueof complementors is considered as a significant challenge, which start-ups face in the market.
“There are inherent risks and challenges in engineering and manufacturing. For example, whiledesigning our product, we visited numerous manufacturers as the production process such as innerbody and leather skirt. However, as a first mover advantage, we need more time to develop ourcomplementary products in order to make our products in a more stylish and customized design(company A).”
As it has been done by Sendrato and TZOA companies, which are WTs companies, whilemost WTs companies have targeted B2C markets, B2B markets strategy provides goldenopportunities for this type of companies to broaden their commercialization options,particularly for the companies that are able to structurally obtain the outcomes associatedwith broader and more granular information. Therefore, this group should be considered asone of the early adopters in the targeted market segments in a marketing plan to acceleratethe commercialization process and reduce the adoption risk [16].
Based on the outside-in part of “the open innovation model” introduced by Chesbrough [6]a firm acquires ideas from both internal and external sources. New technologies can enter thebusiness process at various stages. Thus, projects which are not compatible with the businessmodel can make money for the firm using different ways such as Spin-off venture companies,outlicensing, and divest. In addition to the prevalent and traditional method of selling finalproducts through the company’s own established sales and marketing channels.
According to Network Externality or Network Effect, raising the value of a productthrough increasing its network size accelerates commercialization and helps attract moreconsumers. Network Externality explains that a consumer’s utility is not only a function ofthe quality, product characteristics, and price but is influenced by other consumers who havepurchased the product too [31]. High technology does not necessarily generate value forcustomers, therefore, to increase value for possible and potential customers, interactionamong consumers within the network should be encouraged.
According to the case study-based analysis of start-ups, it has been discerned that fourstages need to be considered by starts-up for successfully enter the market. The four-stagemodel is provided in Figure 1. Paying attention to two inherently embedded characteristics ofthe model is crucial. First, this model is an endless learning iterative loop, and due to theinterdependence of the stages, each of them should be interpreted as a feature of the wholeprocess, not separate stages; so that the output of each stage can be utilized as an input of thesucceeding stage. Second, as illustrated by the feedback loop, the feedbacks of each stage canbe utilized for other stages.
In regard to taking advantage of the time of entry, and how to overcome market entrybarriers stage, WTs start-ups should utilize and materialize the advantage of first mover togain market share and competitive advantage [32] and strategic agility [25]. Some strategiesthat can facilitate and stabilize the first mover position includes addressing and aligningtechnical and quality factors (i.e., R&D), marketing aspect (i.e., market research), developingmanagers’ both technical and business skills [45,29], and investing more in marketingactivities (i.e., advertising, brand building, and digital marketing). Besides, adhering to threeprinciples, including overcoming lack of value-added services, interoperability, and business
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processes re-orientation can lead to prevailing over market entry barriers [16]. Moreover,start-up firms should take advantage of a strategic kind of business model, which couldaccelerate the market readiness and obtaining a competitive position, including businessmodel generation canvas [39] and the lean canvas [34].
In the second stage (selecting attributes of product; capabilities and design), targeted andpositioned market segments should be satisfied by strategically selected capabilities andcustomer-friendly designed products. In this regard, four fundamental factors exist, namelycustomization, fashionability, connectivity, and ergonomic design. Furthermore, customer-oriented principles should be applied in determining which capabilities should to beincorporated in the products and how they should be designed, including perceivedusefulness, perceived ease of use [10], perceived risk, and social and aesthetic factors [6].
In the third stage (product development process), WTs start-ups are advised to developnew and innovative market-driven frameworks for product development process that issuitable for volatile and fuzzy technology-intensive markets. This framework could have thepotentials to allow sustainable competitive advantages ranging from prototype process,minimum viable product (MVP), and additive manufacturing (i.e., 3D printing). Moreover,utilizing lean, flexible, and customer-oriented product development frameworks, which maynurture continuous learning, is recommended. For example, start-ups may deploy a customerdevelopment process [4] and the lean start-up methodology (the build-measure-learnfeedback loop) as noted by [48].
In the fourth stage (commercialization), following the guidelines in various fields ofcommercialization, WTs start-ups can accelerate commercialization. The guidelines includeemploying personnel with both technical and commercial expertise’s that arewidely acceptedin the market [16]. Furthermore, targeting complementary goods market, B2B market,experts and academic communities can provide start-ups with alternative markets.
Developing both technical and business skills
Paying simultaneous and aligned attention to both technical and quality aspect (like R&D) and marketing aspect (like market research)
Being a fist mover
Greater investment in marketing activities like advertising, brand building, and digital marketing
-Overcoming lack of value added services-Interoperability-Business processes re-orientation
-Prototyping process-Minimum viable product (MVP) -3D printing or additive manufacturing)
-The Lean Start-up Methodology (the build-measure-learn feedback loop)
-The Customer Development process
Customization
Fashionability
Connectivity
Ergonomic design
-Perceived usefulness-Perceived ease of Use-Perceived riskSocial and aesthetic factors
Taking advantage of time of entry and overcoming
market entry barriers Selecting product attributes;
capabilities and design
Product development process
Com
mer
cial
izat
ion
Feedbacks loop
-Coopetition and Interoperability - Utilizing widely-accepted standards
Employing technically based scientists with commercial expertise
- Targeting complementary goods market- Targeting B2B markets- Targeting experts and academic communities- Spin-off venture companies, outlicensing, and divest
-Increasing Network Externality or Network Effect -Utilizing social networks
-The business model generation canvas- The lean canvas
Figure 1.An iterative learningloop approach of thedrivers of lean andmarket-drivenmanagement of start-ups (WTs market).
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According to Chesbrough [6], Spin-off venture companies, out-licensing, and divest cantransform unwanted products and ideas into money. Moreover, increasing networkexternality or network effect utilizing social media would result in raising the value of theproducts and customer satisfaction [31].
4. Discussion and conclusionAs demand for wearable technologies is increasing tremendously; more andmore players areentering into the multi-billion dollar market. This intense competition calls for thedevelopment of a niche in the industry. All these new devices (e.g., smartwatches, smartglasses to name but many) are generating a tsunami of data, the implications of which we areonly beginning to realize. WTs are undoubtedly able to accelerate the rapid progress ofdeveloping dependent industries (e.g. health, education and so forth) and its market isoverlapping andmerged with other markets such as apparel and healthcare [14]. The infancyof WTs provides the opportunity for the first mover start-ups to influence the market andeventually shape market orientations profoundly.
Consequently, this stimulus has prompted WTs start-ups to act based on the market-driven, lean, and flexible frameworks and guidelines which support continues learningprocess. In order to adapt to this process, start-ups are transforming into learningorganizations, agile and lean businesses; mainly because of the fast-changing environment ofthe technology-intensive high-technology industry. This paper presents a market-driven andcustomer-oriented practical guideline that was extracted from managers’ responses of WTsstart-ups and synthesized the essential interrelated stages of competitively managing WTsstart-ups. According to our study, the ten interviewed start-ups indicated how wearables fitinto and enrich four sectors: health and fitness, lifestyle, productivity, organization andenterprise. Besides, the model in this study turns a start-up into lean learning approaches,which injects feedbacks and knowledge of all stages gained from internal (company) andexternal (market).
At the first step of the process discussed in the model, start-ups should derive thebenefits of competitive advantage of being a first mover and at the same time prevent fromexcessive speed to enter market, which leads to quality and technical shortcomings,entering an immature market and/or premature market entry [32]. Moreover, to avoid thetrap of being merely a manufacturer-driven start-up, first mover start-ups shouldsimultaneously concentrate on both technical and quality facet (i.e., R&D) and marketingfacet (i.e., market research). Besides, they should hone managers’ both technical andbusiness skills [45,29]. Further, to meet customer expectations, start-ups managers arerecommended to pave the way for formulating marketing strategies, pursuing digitalmarketing strategies. To overcome barriers to market entry, three strategies have beenpresented as follows:
First, the barrier of the lack of value-added services can be broken down. In the otherword,adding context-specific features embedded in products, adding social engagement features,and connecting users in different situations using comparing athletic performance, musicfestival and others such asAdding ’Augmented Reality’ toWTs functions that would provideusers with entertainment or information on their environment. Second, to take advantage ofinteroperability strategy, start-ups should actively cooperate with their rivals and relatedcompanies in an open ecosystem to develop shared platforms, manufacture products andservices that can boost the performance and capability to produce complementary productscollectively. Third, collective and user-generated information gathered through beneficiariesof both inside and outside the organization (i.e., stakeholders) and rivals should be consideredin decision making to resolve the problem of excessive optimistic, unrealistic illusions. Thestrategy could aid the successful products designed using the traditional organizational
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up-bottom structure decision-making style. Accordingly, Troster [53] and Page [40] believedthat poor sales of WTs could be ascribed to insufficient interaction with customers or lack ofcustomer consideration which often lead to the poor design and insufficient attention to“wearability.” Finally, start-ups should be managed through a strategic business modelbased on the business model generation canvas [39] and the lean canvas [34]. Dal Lago, Corti& Pedrazzoli [9] reported that CLARA Swiss Tech, a successful Swiss start-up in the WTssector applied Lean Canvas to manufacture and launch CLARA smart jacket; confirmed thebenefits and agility of this managerial tool.
Entering the market as a first mover and utilizing other strategies in the first stage shouldbe supported by the second stage called “selecting attributes of product, capabilities anddesign.” The stage could play a central role in the success of the WTs start-ups as theirbenefits can be effectively and communicated merely by start-ups. First, according tocustomization strategy, products should be customized based on customers’ demands andexpectations. In this regard, technologies such as cloud computing and Internet-of-Things(IoT) can make a substantial contribution in gathering consumer information and productspreferences. Second, drawing on fashionability strategy, WTs start-ups’ focus is still on thetechnological aspect of devices. Thus, moving from the technological side of innovation tofashionability, coupled with the identification of strong use cases for non-technologistcustomers, would allow drawing early majority users. Third, connectivity strategy mentionsthe added comfort and welfare created by expanding users’ communication with theirsurroundings. In this regard, IoT concept has implications to enhance connectivity andmentions to the general idea of making routine items such as food, luxury items, householdappliances, clothing, buildings and so on connected to the Internet to provide integrated andintelligent supervision on several services and devices. Forth, the ergonomic design should beconsidered in the product design stage. One of the essential ergonomic issues is providingphysical comfort for consumers and ergonomic design. The study undertaken by page [40]revealed that wrist-worn devices such as smartwatches and arm mounted devices wouldcontinue to be popular, but head-mounted devices need to provide users with the moreergonomic design.
Due to the importance of customer-driven approaches in choosing capabilities and designof products, we suggest four market-oriented strategies as well. First, start-ups should stresson perceived ease of use in the product design. It should be noted that there is a common beliefthat wearable technologies are more likely to be eagerly adopted by tech-savvy earlyadopters accepting new technologies just for novelty’s sake. These individuals possess theknowledge and know-how required to benefit from the added value of new products incomparison to ordinary users. Second,markets’ perceived usefulness toward products shouldbe improved through identifying and designing required, preferred capabilities for thepotential target market and provide them with well-designed customer-friendly capabilitieswhich are useful for daily life. Demographic information such as gender and age should be thecenter focus on the design process to customize the products accordingly. Third, to eliminatethe perceived risk of using data-driven and technology-oriented products, emphasizing on afuturistic design which is beyond universal design and functional core competence of theproduct is beneficial. Also, regarding personal biometric data-driven capabilities, ensuringmarket from protecting users’ privacy using different manners, for instance, designingwarning reminders in the form of notification proved to be advantageous. Consistent withthis result, many studies found that customers consider privacy issues as one of the majorsources of concern. Privacy issues concerning ’personal metrics’ are contributing factor whyWTs have become unpopular (e.g., [35,27]; Page, [41]. Fourth, the effects of social andaesthetic appeals suggest that the need to pay attention to products’ appearance andsociability factors in order to facilitate social acceptance. This implies that the design ofWTsmust consider sentiment, social, communicative, and sensual factors to enhance interactions
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and social connectivity in line with fashion culture design. In this regard, ’fashiontech’ termdiscuss keeping a balance between social, aesthetic, and technological aspects [52].
Apart from the first two stages, the third stage is product development stage. Utilizinginnovative market-driven methods in the product development may help transform start-upsinto lean and agile strategies, especially for those operating in a highly volatile environmentcharacterized by high uncertainty and fast-changing technology. Prototyping allows them tosatisfy early customers and provide feedback for future development. Most importantly, howconsumers will react to different colours, sizes, and weights of the product. Moreover,utilizing new advancements in rapid prototyping processes like 3D printing or additivemanufacturing is advantageous. Other alternatives include minimum viable product (MVP)technique in the prototyping process can be deployed instead of traditional frameworks thatconsumes time, money, and effort. Secondly, some frameworks including the lean start-upmethodology (the build-measure-learn feedback loop) proposed by [48] and The CustomerDevelopment process are recommended.
The last stage of the model represents strategies and methods to acceleratecommercialization. First, employing technically-based scientists who boast commercialexperience helps manufacture marketable products. Second, we proposed three alternativemarkets for expanding wearables technologies market, namely complementary goodsmarket, B2B markets, and experts and academic communities. Besides, ideas and productswhich are not consistent with the goals of the company can make money for the firm usingSpin-off venture companies, outlicensing, and divest [6]. A good strategy for start-ups toovercome the low usage rate and perceived value ofWTs devices is to sponsor the productionof complementary goods or even sell them at low prices to increase awareness and boost thedesirability of the technology. Availability and accessibility of complementary goods (e.g.applications) affect the size of the installed base, which in turn will encourage production of ahigher number of complementary goods and eventually this process creates a steadilygrowing cycle. Third, utilizing coopetition strategy and using widely-accepted standardshelp start-ups supply their products to more customers and these strategies can be regardedas a market catalyst [16]. Coopetition strategy boasts a variety of benefits for both demand-side and supply-side of the markets. From a user perspective, the strong interdependence ofwearable devices with the smartphone ecosystems and IOT offers access to products andservices that work together and generate added value for users rather than devices alone.Consistent with this strategy, Google is giving smartwatches powered by Google-madesoftware even if that means treading into enemy territory and recently this search giantannounced smartwatches that run Android Wear, the Google-made software tailored forwearable devices, will now work with Apple’s iPhones [38]. Fifth, by Network Externality orNetwork Effect phenomenon [31], utilizing capabilities of the social networks increases theconnection between potential and actual customers in the product’s network and leads to thehigher utilization of the whole consumers and consequently facilitates persuasion andcommercialization [7]. Furthermore, this phenomenon boasts powerful protective benefits,including lock-in effects, excess inertia, switching cost, and even a natural monopoly [17,20].
4.1 Limitations and future researchThe research is limited by the fact that it highlights insights from only ten start-ups. Byhaving more participants, additional insights may be produced. Also, due to inherentdrawbacks associated with a case study-based method as provided by Yin [58], it issuggested that further studies would be required in order to ensure the validity of thefindings, in particular, quantitative studies. Therefore, the generalizability of the results islimited. Our results have revealed the strategies of implementing wearables products forentering the current market. Future researches could also include other perspectives (e.g.
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consumers’ needs), to provide a more balanced understanding of the sharing economy.Further, this study has considered start-ups in the developed countries. Due to an increasingnumber of start-ups in developing countries, a future study could provide more insights intothis domain accordingly.
Notes1 https://orcid.org/0000-0002-6646-2326
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Corresponding authorMilad Dehghani can be contacted at: [email protected], [email protected]
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